Chapter 29 The Big Short (16)

"We have just received news that Standard and Moody's have downgraded the credit rating of United Group's long-term bonds. What is your comment?"

"This is their right, and we have reservations about it. United Group has the confidence, ability and determination to defend its market position." Contini said disapprovingly, "As for the specific measures, it is not convenient to disclose them for the time being. , this is the business secret of our group. Our group has made many achievements across Europe, and this president is experienced in many battles. What kind of scenes have I not seen? You reporters don’t want to hear about these rating adjustments. We are not…”

There were boos and laughter below. Compared with older and mature tycoons, such as Rockefeller and Morgan, the CEO really doesn’t know how to be humble at all. But this is in line with the CEO’s personality. He is still young. He is only 26 years old this year. What were these tycoons doing when they were 26 years old? I'm afraid no one even knows his name, right? At the very least, the CEO can now be as famous as them, and may even be more suitable than them in some cases to serve as representatives of market leaders and public opinion leaders. This is enough.

"Last question, you have expressed your negative attitude towards the stock market, but the vast majority of people hold the opposite view. What do you think about this?"

Contini smiled: "Isn't this normal? There are always different opinions on everything, and the same is true for the stock market. If everyone is optimistic about the stock price increase, then who sold you the stock you want to buy?"

This sentence made many people think deeply and made the topic controversial. Journalists, who doesn’t want news? Controversial news is good news!

In the evening, Hoover and Mellon received the content of Contini's speech at the press conference, and they couldn't help frowning: "What does he mean by these words? United Group is going to reduce its stock holdings?"

Mellon said: "I don't think so. He is just showing that he will not hesitate to reduce holdings to stabilize the confidence of depositors. In fact, there is no problem with the liquidity of United Bank. If you have to say there is a problem, it is just a maturity mismatch and a geographical mismatch. But this Who doesn't have this kind of thing? It's just that United Bank has invested more in Europe for the development of United Group. I received news that he has also ordered a lot of industrial equipment in Germany. It is impossible for the Germans to lend him money. He has to rely on Union Bank has arranged the payment, so as soon as the pressure of the run is eliminated, he will definitely reduce his holdings of the US$500 million, after all, the price is very good.”

"But this threat to reduce holdings will destabilize the stock market..."

"Your Excellency, the most important thing now is to let the run go."

"How to get over it? Let the Fed give up?"

"This is impossible. The Federal Reserve exists for the financial stability of the United States, not for the high-point stock market in the United States..." Mellon shrugged, "Isn't it great today? Let's dive and then pull up. By the way, I would like to wash the market and give some risk warnings. According to common sense, a slow rise and sharp fall is a bull market. If it really falls slowly, you should pay attention. "

"Okay, let me not talk about the stock market for now. How do you think the run will go away?"

"1-2 days is not enough. We must let these people queue for 3 days, and then find that they can all withdraw their money, and the running pressure will naturally reduce." Mellon explained, "The Federal Reserve did issue a risk warning, and United Group They also responded fully and both sides were right.”

"Then who's wrong?"

"Both are correct! What the Fed is worried about is that United Bank cannot withdraw the money, but now that United Bank has reduced its stock holdings and has United Group as a back-up, it doesn't matter whether it can withdraw the money; what United Group is worried about is If the reputation is damaged, as long as it can cope with the run and domestic capital flows, the credibility will only be improved and the funds will come back," Mellon reassured him, "Just wait and see what happens. Other major banks are discussing this evening. Set up a stabilization fund, and when Union Bank has almost exhausted its cash, I will ask other banks to lend a helping hand.”

This sentence seems impartial on the surface. In fact, other banks have already told Mellon: Let the Ministry of Finance not intervene in the rescue of United Bank so quickly. It should put some pressure on the bank first, and then everyone will reach out. , Mellon also agreed. There is a big conglomerate behind him, and the Minister of Finance is only a part-time job. If it weren't for power, given his identity and status, no one would come to work for such a small salary.

At the same time as the United Group press conference was going on, Citibank General Manager Mitchell, Chase National Bank President Albert Wiggin, Guaranty Trust Company President William Porter, Morgan Partner Thomas Lamont, First George Baker Jr., president of the National Bank, and Swade Prosser, president of the Bankers Trust Company, were meeting to discuss how to establish a stabilization fund. The direct losses suffered by these investment companies in today's decline are not small. The most typical one is the batch of shares of United Group's debt-for-equity swap. It has hit the conversion price many times today, although it finally managed to close above the conversion price. But that means the year's gains have been wiped out.

Some people have proposed that United Group should buy back shares to stabilize the stock price, while others have expressed different views. The former is focused on maintaining vested interests, while the latter is focused on finding ways to control part of United Group's industries. Everyone has different purposes, but they say so. The words that come out are very high-sounding.

Mitchell has received clear instructions from the board of directors and holds the latter attitude: "United Bank currently has to deal with a run, so it is impossible for United Group to use the funds from the reduction of its holdings for stock repurchases, and you must pay attention to this fact Ciano Jr. said he reduced his stock holdings by 500 million. In fact, we know that he is leveraged. After reducing his holdings, it will probably be more than 100 million, with a maximum of 200 million. I think this amount of funds is only enough for him to cope with it at most. It’s impossible to buy back stocks during a run.”

"No wonder they are also reluctant to participate in the stock market stabilization fund."

"That's because little Ciano himself is not optimistic about it." Porter curled his lips and said, "He has to prove that he is right, otherwise there will be endless questions waiting for him at future press conferences."

“Is the fall due to the Union Bank sell-off?”

"I don't think so. On the one hand, such an announcement seems to be in conflict with our United Bank. On the other hand, it inappropriately strengthens the voice of United Group. When they sell, the market falls. Is Ciano the baton for the stock market?" "?"

Lamont analyzed: "This is just a trigger. In fact, these shares of Union Bank have already been in our expected selling plan. They have only sold it now, which is unexpected. President Ciano's subsequent views on the stock market determine their What position will be taken? I personally don’t think Union Bank will participate in the rescue. They themselves need rescue!”

"It's not a big deal if Union Bank doesn't participate, and it doesn't matter if Bank of America doesn't participate." George Baker Jr. shrugged, "It's enough for a few of us."

Prosser added: "But I think what little Ciano said makes sense. The current 10% margin is too low. If there is any slight disturbance, it will cause forced liquidation. Today we have liquidated more than 20 customers. It's a headache." It is not that the market rebounded after the forced liquidation and caused customer disputes. The headache is how to protect the positions from being filled during the violent market fluctuations. Today, two positions were actually broken down at the time of the largest decline. Fortunately, they were pulled back later. "

"Then increase it by 2 percentage points, one this week and another one next week."

"agree!"

"I agree too!"

Before the market opened on September 17, these six companies jointly issued a brief press conference, announcing... The heads of several of our financial institutions studied yesterday's stock market fluctuations and low-price selling trends, and we believe that the overall situation is OK. It was the technical conditions that caused the day's adjustment. The stock market risks were generally controllable and the fundamentals were good. Of course, in order to further stabilize fluctuations and reduce losses, we have formulated the following measures:

First, each member contributes US$40 million, making a total of US$240 million to form a stabilization fund;

Second, increase the margin level from 10% to 11% this week and another 1 percentage point next week;

Third, strengthen communication with market stakeholders to avoid unnecessary misunderstandings.

The reporter interviewed several tycoons, and their answers were much duller than Contini's. Most of them were slippery and could be interpreted in any way. Only Mitchell said a few words: "Everyone has different views on the market outlook. It’s normal. Just as the president vowed that there was nothing wrong with Union Bank, but the Federal Reserve still issued a risk warning and people still went to withdraw money, all interest groups have different views on the same thing. Only time will tell..."

The time to prove everything is coming soon. In the highly anticipated market, the stock market officially opens, and everyone holds their breath to watch today's market performance.

Due to Contini's stable stance at all costs and the stance of six banks, the stock market opened higher at 413 points and soon rushed towards 420 points. But Livermore saw clearly that although the stock index was at Slowly climbing, but selling began to gradually increase, instead of triggering more follow-up orders as the stock index climbed as before. He knew that after yesterday's decline, everyone's psychological expectations had completely changed. United's stocks have received a lot of boost, but due to the downgrade of long-term bond ratings, bond prices have been steadily falling and have fallen below the $90 mark.

He tentatively asked the traders to absorb more than 3 million US dollars, and then threw it aside. This is not the main battlefield at the moment. Only after the panic is vented will the bonds go crazy.

At a quarter past 10, the stock index launched its third attack against 425: it stood up, fell down, stood up again, and fell again. There is no 3 minutes that can stabilize at 425 points. At this time, Livermore thought the time was ripe and shouted: "Continue the attack!"

ps: Please give me a monthly ticket. If it exceeds 1,400 today, I will try again tonight...